The UK’s House of Lords EU Committee have written to Lord Myners, the Financial Services Secretary, to express their concerns about the EU Commission’s proposed Alternative Investment Fund Managers Directive.
Although the Committee welcome the broad aims of the proposal, the Committee are concerned that the Directive does not complement global regulatory arrangements. They argue that:
“Co-ordination with the US regulatory regime in particular is essential to avoid a situation in which the EU Alternative lnvestment Fund (AIF) industry loses competitiveness at a global level.”
The Committee go on to say that the Directive risks seriously damaging the EU economy unless it permits the marketing of non-EU funds within the EU and also allows EU funds to invest outside of the EU. They point out that many of the witnesses who have given evidence to the Committee have argued the current proposals are ‘protectionist’ and bring with them the danger that pension funds, charities and other institutional investors in AIFs will see diminishing investment returns on European based AIFs.
The Committee also stress that the current ‘one size fits all’ approach to proposed regulation put forward by the European Commission is flawed. They argue that the transparency and disclosure elements of the proposals should be amended to take account of the variations of different types of investment funds. This is important to ensure regulators are not swamped with large amounts of irrelevant data.
The Committee also argue that the Commission’s proposals give an unnecessary level of protection to AIF investors who are typically well-informed institutional investors and banks.
Baroness Cohen, chairman of the House of Lords EU Sub-Committee on Economic and Financial Affairs, said: “Alternative Investment Funds are an important part of the economy and while they should be regulated properly, they must not be driven out of the EU.
“It is vital that the European Commission have regard to the international competitiveness of European based Alternative Investment Funds. The most important thing is that regulation in Europe complements international regulation and works alongside proposals in the US. We are concerned that the current proposals do not achieve that.
“We will keep the AIFMD under scrutiny until we are convinced it has been improved to be in the best interests of the UK and EU economy, and of EU investors. We will be publishing a full report in the new year, which will take account of developments and will ensure that the government is updated on the Committee’s views.”
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